The Financial Statements of the Government of Iceland present the Government’s annual financial results and financial position. They show how public funds were used during the year and the Government’s financial position at year-end.

The financial statements are prepared annually in accordance with the Public Finance Act and the International Public Sector Accounting Standards (IPSAS).

What is included in the Financial Statements?

The Financial Statements are divided into three parts, each providing a different view of the Government’s finances.

The Government as a Whole

The first part contains the consolidated financial statements for the Government of Iceland as a whole. These include:

• Statement of financial performance

• Statement of financial position

• Cash flow statement

• Statement of changes in net assets/equity

• Notes to the financial statements

The consolidation includes entities in Part A, Part B and Part C. Transactions between these entities are eliminated to provide an overall view of the Government’s finances.

General Government Sector (Part A)

The second part contains the consolidated financial statements for the General Government Sector (Part A).Part A is divided into Parts A1, A2 and A3. Most government entities belong to Part A1, which primarily includes entities financed through budget appropriations.

Supplementary Statements for Part A1

The third part contains supplementary statements and detailed breakdowns for Part A1 entities.

These provide additional information on:

• Financial performance

• Financial position

• Cash flows

Part A1 mainly comprises activities financed through tax revenue, statutory service revenues and government contributions and corresponds to the activities presented in the State Budget.

Purpose of the Financial Statements

The Financial Statements provide Parliament, government authorities and the public with a comprehensive overview of the Government’s finances and annual operating results.

Monthly financial overviews for the A1 part of central government are published quarterly in accordance with Article 61 of Act No. 123/2015 on Public Finances. They are based on accounts prepared by the Financial Management Authority and show the financial performance and financial position of the A1 part of central government from the beginning of the year to the end of each quarter. They also compare budget authorisations with actual expenses by policy area and policy sector.

The monthly financial overview includes:

• Statement of Financial Performance

• Statement of Financial Position

• Cash Flow Statement

• Breakdown of Government Revenue

• Overview by Policy Area

• Overview by Policy Area and Type of Expense

• Overview of Economic Classification by Policy Area

• Breakdown by Policy Sector

• Loan Overview

The monthly financial overview provides information on the financial performance of central government based on revenue collected and expenses recognised during the period. Budget figures are based on the approved operating plans of government entities and the expected timing of revenue during the year.

The monthly financial overviews do not fully include certain financial obligations and receivables that arise during the year if they do not affect payments to or from central government. These amounts are included in the year-end accounts. Income from interests in other entities is also not included in the monthly financial overviews but is recognised in the year-end accounts.

The Supplementary Statements in the State Accounts cover the A1 sector of central government and provide additional information on public finances.

They include information on the operating result, financial position and cash flows of the A1 sector, together with comparative figures from the previous year.

Comparable figures from the State Budget and supplementary budgets cannot be provided because operating results are not prepared on the same basis.

The State Budget is prepared in accordance with the Government Finance Statistics (GFS) framework, while the State Accounts are prepared in line with the International Public Sector Accounting Standards (IPSAS). Although the two frameworks are broadly comparable, they differ in certain aspects of the presentation and measurement of financial information. As a result, the operating result reported under IPSAS is not directly comparable with the State Budget or supplementary budgets.

One of the Supplementary Statements explains the main adjustments between these reporting frameworks.

The Supplementary Statements also provide information on:

• government revenue by revenue category,

• expenditure by policy area and function,

• consolidated operations and financial position of government entities,

• appropriations for operations and investments by policy area and entity,

• transfers of budget authorisations,

• tax expenditures,

• earmarked revenue,

• sales of tangible fixed assets.

Additional information is also provided on binding long-term commitments of entities within the A1 sector and on the allocation of year-end balances for the carry-forward of budget authorisations between fiscal years.

The content, order and presentation of the Supplementary Statements may change from year to year in line with the structure of the State Accounts and reporting requirements.

An annual report provides an overview of the financial performance, expenditure, and outcomes achieved within a minister's policy areas during the fiscal year. It explains how public funds were used and assesses results in relation to established objectives and priorities.

Under Act No. 123/2015 on Public Finances, ministers are required to publish an annual report for their policy areas. The report presents actual expenditure by policy area and policy field and compares it with the appropriations approved in the State Budget. It also includes information on transfers of appropriations in accordance with Article 30.

In addition, the report provides information on appropriations allocated to individual government entities and projects and evaluates the benefits achieved through their use in relation to the objectives and actions set out under Article 20.

Consolidated financial statements combine the financial results of the Treasury and entities included in the government group into a single set of financial statements. Assets, liabilities, revenues, and expenses are presented together to provide an overall view of the state's financial position and performance

The State Financial Statements consolidate Category A, B, and C government entities.

The Financial Statements of the Central Government cover all government activities and are divided into the A, B and C sectors. This classification reflects the nature of each entity's activities and how they are financed.